Africa could well be the next big frontier for cryptocurrencies. Many crypto owners are already residing in Africa. The success of mobile money in Africa could be why this is possible. Many users are already comfortable using digital payment solutions.
This comfort with digital payment solutions is already helping the penetration of cryptocurrencies. Triple A’s crypto ownership data places three African countries among the top 20 countries with the highest number of crypto owners. These include Nigeria, South Africa and Kenya at numbers 4, 10, and 13 respectively.
An overview of mobile money in Africa
The global mobile money industry recently passed the $1 Trillion mark. Interestingly, Africa’s stake in this is at 70%. Most mobile money transactions in the world are happening in Africa. This is according to the GSMA in their State of The Industry Report, 2021. Favourable policies and regulations are enabling this massive growth of mobile money. Additionally, partnerships with other financial institutions are pushing the expansion forward.
But, the mobile money industry is not without challenges. Mobile Network Operators (MNOs) own and run the majority of the mobile money platforms. These MNOs primarily operate within a country’s border. This makes cross-border transactions difficult or impossible.
Another challenge facing mobile money in Africa is slowly developing. Several countries have recently introduced taxes on mobile money transactions. These include Zimbabwe, Uganda, Ghana, Tanzania, and Cameroon. This puts a strain on consumers as it increases the cost of transactions. This could affect the continued adoption of mobile money solutions. Worse, several countries are considering introducing mobile money taxes within their borders. These include Kenya, Nigeria, South Africa, Egypt, and Mauritius.
While these challenges impede the further growth of mobile money, crypto has a chance to thrive. According to TradingBeasts’ article about the biggest brokers in the world, various big brokers such as Exness, IQ Option and HotForex have already started adding crypto as a possible payment method that their clients can use.
The opportunity for crypto and blockchain in Africa
Cryptocurrency could be the solution to the challenges that face mobile money in Africa. First, cryptocurrency transactions are not border-restricted. Users can send funds to anyone in the world without any limitations.
Additionally, cryptocurrency transactions are very cheap. There are no taxes involved. The only charge to consumers is the mining fees involved. These are close to zero if not zero in most cases. This is possible through decentralization. Decentralization removes third-party institutions that process transactions like banks.
Furthermore, decentralization leads to financial independence and self-governance. No central institution controls when and how people can transact. People are free to transact with whomever they want at any time. Moreover, no central institution controls the value of cryptocurrencies. This ensures the stability of the value and curbs inflation.
The economies of many countries in Africa are at risk of collapsing due to inflation. Zimbabwe is an example of how hyperinflation can collapse a country’s economy. Such problems can be avoided through the adoption of cryptocurrencies. Consumers can use cryptocurrencies such as Bitcoin as a store of value due to their deflationary nature.
An overview of cryptocurrency adoption in Africa
Several countries in Africa are already exploring the prospects of Central Bank Digital Currencies (CBDCs). Examples of such countries include Uganda, Kenya, Tanzania and Zambia among others. However, some countries already have CBDC in operation. Unfortunately, some have not experienced much success in adoption by citizens.
Nigeria already launched its Central Bank Digital Currency, the eNaira. The Central Bank viewed this as a digital version of the Naira with the same value. Users could exchange this digital currency with the physical Naira at any time. However, the eNaira would reside within phone wallets. For this, the Central Bank of Nigeria launched two eNaira mobile wallets, one for individuals and one for retail clients.
Unfortunately, the eNaira mobile wallet did not survive long on Google Playstore. The majority of the users who downloaded the application left negative reviews. This led to Google taking the application off of Playstore. Many users insisted that the central bank was not ready for this launch. The application was inferior in functionality and had lots of broken links.
Furthermore, this digital currency is operating within a centralized and controlled blockchain. This is defeating the core principle of cryptocurrencies. Many people viewed this as an attempt to curb the popularity of crypto in the country. Before the launch of the eNaira, Nigeria’s government banned the trade of cryptocurrencies.
The central bank even ordered the closure of accounts of individuals trading cryptocurrency. However, this did not stop the P2P market from growing in Nigeria. Nigerians are still among the biggest players in the crypto market.
In any case, South Africa and Ghana are currently running pilots for their CBDCs. Ghana is experimenting with the e-Cedi that anyone with a mobile wallet or contactless smart card can use. In contrast, South Africa is experimenting with a wholesale CBDC. This is for financial institutions for interbank transfers. The country is also experimenting with cross-border transactions with the central banks of Malaysia, Australia and Singapore. Remember that South Africa is one of the most pioneered African countries when it comes to tech or trading. After all, most of the African traders are actually located in South Africa many of which either have USD or ZAR trading accounts.
Challenges facing crypto adoption in Africa
There are several challenges impeding the adoption of cryptocurrencies in Africa. One is the lack of cryptocurrency education. While a decent chunk of Africans, especially south Africans understand stocks and forex. It seems that only the youth is aware of cryptocurrency and blockchain technology. Still, even among the youth, there is a majority of people who do not understand crypto and blockchain. This is because there is no existing framework to educate the public on this subject.
However, there is a rise in interest to learn and adopt crypto in Africa. Many people are looking to social media and platforms like Youtube to educate themselves on crypto and blockchain. This signals a possible rise in the adoption of crypto in Africa.
Another challenge facing crypto adoption is the existence of scam operations. Many people have lost their money to MLM projects pausing as crypto vendors. This greatly diminishes the level of trust by public members.
The lack of merchants accepting crypto is another challenge facing crypto adoption. There are not many stores or vendors accepting crypto payments in Africa. However, almost all establishments accept mobile money payments. This existing payment system is a great impediment to the growth of crypto adoption. Mobile money is already convenient and has the trust of the public. It is hard to beat that.
The success of mobile money in Africa is evidence that Africans are willing to adopt and trust new technologies. This is further evidenced by the growth of crypto adoption in Africa. Government intervention to curb crypto adoption proves futile. Even with the ban on crypto trading, the P2P market in Nigeria still flourishes. With continued education, there is great potential for cryptocurrencies in Africa. Several African countries are exploring the launch of Central Bank Digital Currencies.
We could well see the rapid rise of crypto adoption in Africa. While it may not replace mobile money, it could complement it.
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